Tax law stipulates that property values must be determined separately for gift tax purposes. This is also evident from a judgment by the Federal Fiscal Court dated July 26, 2023 (Case No.: II R 35/21).
In the case of gifts, tax law provides allowances for gift tax for close relatives. For spouses and partners, the allowance is currently 500,000 euros, and for children, it is 400,000 euros. The allowances can be utilized again after ten years. The legal leeway that tax law grants for inheritances and gifts should be optimally utilized. The business law firm MTR Legal provides a lawyer versed in tax law to assist its clients.
To transfer assets in a tax-optimized manner, one should act proactively and involve a lawyer specializing in tax law at an early stage. This is especially true for gifts of real estate, as the proceedings before the BFH show.
In this case, the plaintiff received a co-ownership interest in a property as a gift from his father in 2012. The responsible tax office assessed the property value at 90,000 euros. Since the son’s allowance of 400,000 euros was not exceeded, no gift tax was due.
Five years later, the father gifted his son 400,000 euros. As this was the second gift within the ten-year period, the tax office calculated the total value of both gifts. Since the son’s allowance was now exceeded, the tax office assessed a gift tax of 10,000 euros. It considered the property value at 90,000 euros, as determined in 2012.
The son objected to this. The property had been overvalued in 2012. However, since no gift tax was due, he let it stand. Now, the value should be corrected downwards. As it turns out, the son should have sought the expert advice of a lawyer specializing in tax law at an early stage. A lawyer could have advised him in 2012 to contest the determined value. This value is also used for all subsequent gifts within the ten-year period, as the BFH emphasized.
MTR Legal provides advice on gift tax and other tax law matters.
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